What should be done with used products?
09 Oct 2008Consumers worldwide are increasingly demanding that businesses should ensure environmental and social sustainability and are supported in this by “take-back” laws, particularly in the European Union. Belgium, for instance, has its own policy in this area, known as Recupel. The law requires retailers to take back an old appliance, free of charge, when a new, equivalent appliance is purchased.
For example, you can return an old freezer when you buy a new model. The product’s brand is not important, nor is the place of purchase (small retailer or supermarket). When a new appliance is delivered to your home, the vendor is obliged to take back your old one, free of charge, if this is what you wish. Recupel relates to all waste electrical and electronic equipment, as defined in the European Directive.
End-of-life responsibilities
Robert Klassen and two fellow researchers considered the question of what to do with a product when the customer is finished with it. In other words, they looked at the reverse supply chain (RSC). Unlike the forward supply chain, the process of converting raw materials into finished goods, the reverse supply chain refers to the various activities necessary to retrieve a product from a customer and either dispose of it or recover value. As European legislation also applies to non-European importers, Klassen and his colleagues decided to concentrate on whether Canadian firms, especially those operating internationally, were taking their “end-of-life” responsibilities seriously.
The study
The firms in the study they conducted represent various industries, selected because of the high probability of their involvement in RSCs, specifically in remanufacturing, e.g. electrical equipment and machinery manufacturing. Out of 502 surveys issued, a total of 126 surveys were returned, yielding a response rate of 27%. Response rates greater than 20% are generally considered acceptable in supply chain management research. The researchers make a distinction between two types of recovery of end-of-life products: low-value recovery, which involves waste management and recycling, and high-value recovery, which involves reconditioning or reuse. Recycling used parts of copiers in new copiers is an example of high-value recovery.
Unfortunately, the research results indicate that only 48% of products are recycled and 34% are simply disposed of as waste, which means they end up as low-value recovery. The remaining 18%, however, results in high-value recovery: 13% is reconditioned and 5% is reused.
Further research showed that organisations that recycle or dispose of their used products mostly call in third parties to get rid of their returned products. The researchers conclude that by taking initial responsibility for their returned products themselves, these organisations will be forced to consider a reverse supply chain. And this presents them with a significant opportunity: not only can they add to the environmental benefits – highly appreciated by consumers – but they can also try to capture more and more value rather than have to create it anew each time.
One of the co-authors of the study, Robert Klassen, is a member of the Flanders DC Faculty in Residence and Professor of Operations Management at Ivey School of Business in Canada. He will hold a one-year appointment at Vlerick Leuven Gent Management School, where his research will particularly focus on improving social performance in supply chains in Flemish multinationals. In searching for previous pioneering research exploring the links between the natural environment and operations, we came across recent research he carried out on Canadian firms.
Want to find out more? Kocabasoglu, C., Prahinski, C. & Klassen, R. (2007), Linking forward and reverse supply chain investments: the role of business uncertainty, Journal of Operations Management 25(6), 1141-1160.
25(6), 1141-1160.
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